How the eff do you Californians afford houses?

[marcg]

The other California post inspired me to ask this question again:
How the eff do you Californians afford houses?

I checked into moving out there...the salaries seem to be about 16% higher but the cost of living
is like 30% to 40% higher???????????
Factor in the house and I ask again:
How the eff do you Californians afford houses?

I guess if your parents are rich or bought a house back in the day you could be in shape to afford one but
for an outsider to come there and try to make it....you gotta be nuts...maybe I am missing something here....or
does everyone just rent and have massive debts out there AKA: never getting ahead????????????

[chavez]

marcg, I like the rich parents scenario - I need to get me one of those!

But really - with interest rates below 6% and new and "creative" financing, it is possible to own a house that would have been out of reach in the past. The problem with "creative" financing is you are basically buying a house on margin - betting that the price will go up. Being in the financial/securities field and seeing my share of people get royally screwed because they bought everything on margin when the market fell out from underneath them. I see the same thing happening with home prices - all markets are cyclical and for every up there is a down and vice-versa - I will caveat that by saying that usually the lows are usually not as bad as the previous lows, creating an averaged upward trend. For the securities markets this averaged upward trend is somewhere near 10% annually. I'm not sure exactly what it is for real estate, but I would assume it is near 5%.

To answer your final question: I rent becuase there is a glutt of rentals on the market in my area - tons of people bought real estate as an investment creating an oversupply. So basic economics had to kick in and therefore rental prices dropped. So I rent a comfy 1100sqft duplex with a decent backyard in one of the nicest areas of Nor~Cal for $1100. If I owned a home in a nearby area I would have a mortgage payment of approximately $1800 - so for now I will pocket the extra $700 and be happy with my current pad.

[jordan23]

Marc, Not all of us in Cali have rich parents that help us. In fact, I think I provide my mother and father more financial assitance then they ever have for me in my adult life. (Notice, I didn't count being 18 or under)

And I agree with Chavez on some of his points! However, I don't see the market slowing down here in So Cal. To give you an example: I bought the house I live in today March 1st 2003 for $419,900 and on Saturday my next door neighbor sold his house for $619,900. It sold in 2 days! The avg sales cycle for my neighborhood is 8 days.

So Chavez, while you pocket your extra $700 a month because you rent, I continue to get tax breaks and make approx $16,666 a month in apprecation.

By the way Chavez, I'm not taking a stab at you, just saying there is a couple of ways to look at it.

By the way Marc, doesn't hurt when you make six figures

[chavez]

jordan23, I'm looking at it from an economic cycle/financial market standpoint. While it's great to believe that there is no end in sight, reality can will and must set in somewhere down the line. That being said, I don't think your house in RSM will ever go back below what you bought it for - unless this real estate bubble continues to grow at this pace - I fear a major blowup in the market, similar to what happened to the NASDAQ in 00-02.

The saying the bigger they are the harder they fall does apply to financial markets (real estate included) to an extent.

FWIW: Healthy growth is 10%. According to what you just said things are shooting up 33%. In my educated opinion that is UNhealthy and leaves a whole lot of room for disaster.

BTW: I didn't see it as a stab at me, no worries Also, this is my last year (2003) of writing off mortgage interest I sold my house in Vegas at the end of April 03...

[marcg]

Hey jordan23 who do you sell software for?

I am in the software game not sales though, but I was thinking about shifting to something else....cannot outsource Sales.

[jordan23]

Chavez, Why in the world would you ever sell your house in Vegas? I am looking to buy a condo or smaller house there.

By the way I agree the market is growing way to fast down here right now and I know the market could go anyday. However, I sell software and Magizines like Fortune, CC Tech, and other sources are saying So Cal is going to be the next Silcon Valley.

Now before everyone starts to hit me, I bring this up because if it's even remotely true, then I figure I have 5-6 more years till I have to bail. Then take my profits and move back to AZ.

By the way Chavez, what do you do? You got some good financial views.

[chavez]

jordan23, I work for a Investment Advisory/Financial Planning firm. I have a nice pile of securities licenses as well..

Good plan - take the money and run!

I sold the house in Las Vegas because work brought me back to Nor~Cal and after weighing the pros and cons of renting it out, the cons outweighed the pros.

[jordan23]

Mark,

I sell software for Centergistic Solutions. We provide call centers with real-time and historical analytic solutions.

Chavez, Speaking of Financial planning....Do you know any good firms in So Cal? I need to move some money and stocks around. Let me know if you do.

Thanks,

Keith

[J-Ro]

A lot of pople got lucky. We bought our house in 2000 and couldn't justify the price our house is worth now. IE we wouldn't buy our house now but since we are looking to move up, its ok. We have friends that can't get into a house...not so much because it is too expensive but because they don't want to put themselves in a bad financial situation. The more I live here the more I think people are up to their eyeballs in debt. My wife and I do pretty good but we pay ourselves first (Savings and retirement) then spend...no credit card debt, etc. After that its tough to justify buying a new Escalade or something. I would move out of state but its pretty damn nice here even with all the problems

[chavez]

J-Ro, roger that. I see the same thing. The only ones I see as doing OK are the people who were smart/lucky enough to have bought in 2000-2001. I don't know if you are in Roseville/Rocklin but out here its a sea of new and expensive SUV's and trucks - mostly with younger people behind the wheel. I can't help but think these people are most likely in debt up to their ears.

jordan23, unfortunately no. If you are looking for some long-term planning I would highly recommend finding a CFA/CFP that someone has referred you to. Beware of stockbrokers and whatever you do, stay the heck away from the bigger firms and banks. Ask around - maybe you know someone who is retired and living well (not extravagantly!!) that can refer you.

Once you have found someone, make sure you check out their record - I wouldn't go to anyone who has had a serious issue in the past. You can do a broker search here: http://www.nasdr.com/2000.asp All disciplinary action is public record.

[buckthis]

1/2 million for a house! forget it, my property is nicer than most in cal. and is not even worth 200gran

[chavez]

buckthis, but your weather and topography is not.

[jordan23]

Thanks for the info Chavez!

buckthis, I travel to Ohio 3-4 times a year and it's beautiful place but it's nothing like Cali. We do pay alot of money for our houses, gas etc.. but the quality of life is second to none! A company would have to pay me double my base to consider moving from Cali.

[RampageWake]

ChevronTexaco has moved many of their employees based in Cali to Houston because they were having to pay more $$ to their employees for them to be able to maintain a decent standard of living. I've talked to many transplants that were like holy stuff! we can buy this new 5000 sq ft house on a golf course for what we sold our (much smaller) house in Cali for...

[chavez]

RampageWake, that's mainly due to ChevronTexaco's home office location: San Ramon, CA.

I grew up there and my father still lives there. His 1600 sqft house which he purchased for 205k is now worth something like 600k. Gas there averages $0.20 higher than locations less than 10 miles away. Apartments START at $1200. Hell, even food is more expensive! I can't blame CT at all for that move.

You know who else did the same thing? Cingular wireless. When it was Pacific Bell out here (also HQ'ed in San Ramon) they needed to be in CA. When they were bought by Cingular, they wanted to move all the employees to TX. My stepmother was a supervisor there - and turned down the move as did many of the managment personnel - most of whom had substantial real estate gains and could afford to turn it down - plus it was 2000 so there were plenty of other jobs to be had in the Bay Area.

Now that I am out here in the Sacto suburbs, I am seeing the same thing happen with HP. They have moved a number of employees from the Roseville Campus to TX.

The governator is working on several issues to make CA more attractive to big business, starting with workers comp. Once we get some of these messes straightened out, the businesses will begin to come back home to CA.

[Nor*Cal]

[jordan23]

Nor*Cal, I agree!

[RampageWake]

chavez-y-chavez,

Yea, San Ramon, I've never been there, but I have to go this summer for a business trip. CT just took over the old Enron Bldg here in DT Houston, and they are moving ppl from CA, LA, etc... to here. Real Estate appreciation is a double edged sword for sure. On the one hand your asset is worth more, on the other, your asset is worth more to the taxing authority, and the cost of living in that area increases also....

I have friends who are house poor, bought the biggest house they could afford ~300K, and then they find out RE taxes are 8-9K per year. + Ins, + Heating/Cooling, water, sewer, HOA dues.... Crazy.

[Chales]

I want to eventually move to California... anything special I should do? Or should I just forget it?

[chavez]

RampageWake, when you go you should slate out some extra time to get some Delta action in... only 25 miles away from San Ramon!

[RUSSIAN]

I live in Dublin(right next to san ramon) I pay 1180 for a nice one bedroom apt. The delta is 20 min away and it's pushing 90 as we speak(to bad I don't have a second or a third ). I could also drive 3 hours and hit up tahoe, or drive 1 hour and surf in santa cruz, or skate a park almost anywhere. It's all what you think are priority's. I would love to have some land, but I'm not going to give up all that I have to do it. And yes we plan on buying a house here

[BurkeViper]

There are always loans and 2nd mortgages

[chavez]

BurkeViper, thats not all... there is even more "creative" financing.

[NorCalStud686]

RUSSIAN, Santa cruz is about an hour and a half from Dublin (im from P-town). i thought it was anyway.

[chavez]

NorCalStud686, 1 hour given little to no traffic. Which is almost never so yeah probably 1.5 hours.

[NorCalStud686]

[Garrett Cortese]

As a college student in Boulder, CO originally from Nor Cal, I see two ways to have a house:

1. Family history. I'm the third generation of my family to attend Burlingame High School. Both my grandmother and mother were raised in Burlingame and went to high school there. After college my mom got married, came back to Burlingame and started a family. My parents bought the house where they still live in 1975 for about $72,000. It would now sell for about $950,000. I obviously can't do this because a) I don't have a time machine to go buy a house for $72,000 and, b) I have no money coming out of college to move back to the Bay Area and afford living there. So that leaves option 2...

2. (This is my plan)...marry rich...

[RUSSIAN]

NorCalStud686, chavez-y-chavez, all times were with no traffic it could take an hour to get to the delta on a weekday afternoon
I would like to buy an older house in dublin, but you never know, it's pretty pricey around here. we will stay in the bay area though, cause what I do(electrician) pays alot better(and I mean alot) here then most other places.

I could easily go live in the sticks and have some land, but then I would have to sell my truck and boat. I don't want to do that

[finkle]

I personally think cali is overpriced and overrated.

Before you cali folk get your panties in a twist, just hear me out:

Ok, so cost of living there is extremely high. Why, because there are so many people that someone is always going to be willing to pay those prices so then other businesses follow the same practice? Seriously, my parents bought their current house on 3 acres w/ pool for 450k. They got a steal on it through who they know. They could sell it tomorrow if they wanted for probably about 650k easy. But if it were in cali, it would probably be close to 2-3 mil. Which is total bs.

Don't get me wrong, I'm considering socal and florida in a year, but the cost of living is entirely crap.

[chavez]

kswiss, the truth to why people love it here: we have everything. Beaches, Ocean, Lakes, Rivers/Delta, Mountains, Desert, and great weather to go with it.

Overpriced, definitely. Overrated, not a chance in hell.

[RUSSIAN]

kswiss, I agree that housing costs are outragous here, but the weather and accessability(s/p) of things added to high wages makes it worth it. The weather has been really good lately, I rode 3 times last week with just a 1.5 long sleeve shirt on, can't beat that.
If part of your move is for wakeboarding, then I would consider nor-cal over so-cal. We have more lakes and the delta

[chavez]

RUSSIAN, you forgot to mention that when you aren't wakeboarding there is Tahoe and all the great places to ride around there.

[NorCalStud686]

i dont know if the delta can be a selling point

[Bill Y Bob]

Maybe people like me like to live in Antarctica
If prices for everything are higher, do you always get paid more than other areas of the country?

[Lynsey]

My mom recently sold her condo in Dublin within 3 days! She bought it for around $280K in 2000 and sold it for $400K three weeks ago, 15K more than what she listed it for. After being out of work for two years getting her masters, she just got a job and is getting back on her feet and wanting to pay off her debts she accumulated (smart move). I want to buy a house too but it depends on where I find a job at and how much I can afford, I may have to move out of state to do that